What Influences Consumers to Buy or Rent Their Homes

Even the most dramatic housing crisis since the Great Depression wasn’t enough to dampen Americans’ desire to own their homes.

A recent studyby Fannie Mae came to that conclusion and attempted to answer some major questions: What influences consumers’ current home ownership status? What would motivate us to buy versus rent in the future? And are we influenced by unconscious biases that lead us to make less than ideal choices, such as buying too much house, or others that might prevent a well-qualified renter from buying at all?

Naturally, Fannie Mae — the government-owned housing agency — has a reason for investigating: the answers to these questions have implications for housing policy makers and the industry. And the survey found that home ownership still appeals to the majority of Americans: 85 percent said owning makes more sense than renting over the long term, and 64 percent of those polled said that they would buy a home if they were going to move.

The survey, which analyzed Fannie’s monthly housing survey data for all of 2011, looked at three different groups of consumers: renters, homeowners with a mortgage, and those who own their homes outright. (The Fannie Mae National Housing Survey polls 1,000 adults each month across the United States with more than 100 questions about the economy, household finances and owning and renting; this study’s full-year data includes information from more than 12,000 people.)

Researchers found that demographics — including income, age, marital status and employment status — were the primary drivers behind individuals’ current home ownership status, as well as what influenced outright homeowners’ future intentions to own or rent.

And perhaps not surprisingly (particularly when mortgage underwriting is tighter) homeowners with mortgages were more likely to be middle-aged, married and employed full time with higher incomes, whereas the converse was true for renters. Outright owners tended to be older, more likely to be retired, widowed and past their peak earnings years, the study said.

But renters’ and people with mortgages’ “intentions” to buy or rent as their next move were largely driven by their financial and housing attitudes, the study said. The most influential belief was whether they thought “owning or renting makes sense financially over the long term,” which influenced all three groups, and especially renters.

The perceived ease or difficulty of getting a mortgage influenced the intention of homeowners with mortgages, the study said, but wasn’t as big a factor for renters.

Meanwhile, the study results also found that once consumers buy a home, get a mortgage and have a positive experience owning, they wanted to continue to own. But concerns about affordability — both for the home purchase itself and upkeep — was a major factor that discourages renters from taking the plunge.

“For renters and mortgage-owners, aspirations for and belief in home ownership play a major role in decision-making, possibly forming a ‘home ownership optimism’ in determining whether they expect to own or rent in the future,” the study said.

“It is possible that many of these drivers, especially the attitudinal ones, act as automatic or unconscious biases that lead consumers to less fulfilling and less successful housing choices,” the researchers said, adding that further research is necessary.

The researchers also found that exposure to default, perceived appreciation or depreciation in home value, and self-reported underwater status had only a minimal effect on predicting whether a consumer intended to buy or rent for their next move.

What influenced your decision to buy or rent? Are you satisfied with your decision? And has the housing crisis altered your views on home ownership?